Building the Future of Blockchain and Crypto

MAGAZINEMAY 14–16 | NYC

BUILDING THE FUTURE OF BLOCKCHAIN AND CRYPTO Plus BlockChain and IoT, The End of Trade Wars, and more insight from the CoinDesk Advisory Board Contains complete AGENDA & GUIDE for Consensus 2018

Powered by 8.5x11.065_Globacap_Consensus_2018.indd 1 4/6/18 1:43 PM Letter from the Editor THINKING AHEAD FOR THE 2020s A black-and-white ad. A computer as big as the woman hunched over it. “Only $5,995.”

hat was the state history in mind. seeks to provide perspective. of the art, it turns At a time when money is flowing Are these early blockchains akin to out, in the age freely and promises of riches abound, the first computers, expensive toys of “microcom- it’s important to remember that long- useful mostly for advancing science? T puters,” but the term value isn’t reflected in transitory Or will the blockchains already avail- pricing, plucked price tags, nor can it be adequately able grow and change, thriving over from a 1970s measured by dollars and cents (or, time due to the power and inclusive advert, still has resonance, maybe I’m afraid, in gwei or satoshis). nature of open-source code? now more than ever, given that the Personal computing may cost less For the next three days, we nascent tokens and cryptocurren- today, but would anyone argue even hope you’ll find value in the ques- cies of today cost as much as family its smallest offerings (think 140-char- tions, even if we can’t promise any vehicles. acter tweets, basic calculators, answers. As the advert that inspired The lesson? What we value and simple flashlights) aren’t valuable? A this messages ends with the mantra, how we value it fluctuates over time. vital resource for millions? “Thinking ahead for the ‘80s,” so, You’d be hard-pressed, I’d assume, Such questions of the notions too, would we be well served by to find a buyer willing to pay that of value, while complex, are no adopting a similar mindset. asking price for an “IMSAI 10-mega- doubt top of mind given the explo- For the next three days, you byte computer” at Consensus 2018 sion of interest and investment in have an opportunity unique in its (though I can’t be too sure given the blockchain sector. Many of you value—the best and brightest minds the many events that comprise NYC will likely have pressing questions— are here to learn, listen and chart a Blockchain Week). where should you invest your time, course for the future. Looking out at the landscape of resources and money? Am I too Let’s think ahead for the 2020s, a competing blockchains, cryptocur- early or too late? better 2030s—and beyond. rencies and tokens you’re likely to That’s something you’ll be hearing hear from in the coming days, it’s more about, no doubt, in the coming –Pete Rizzo, perhaps helpful to observe with days as our agenda of global experts Editor-in-Chief, CoinDesk

Consensus 2018 1 10

24 16 CONTENTS

Features

Letter from the Editor...... 1 Thank You to our Sponsors...... 4 Coindesk Advisory Board...... 7 Amid Chaos, our Decentralized Future is Being Built...... 10 Adapting Blockchain for IoT: Establishing Trust Among Things...... 16 Capital Set Free...... 24 And What Has the Blockchain Ever Done for Us?...... 31 Manufacturing and Blockchain: Prime Time Yet to Come...... 35 Making Trade Wars Obsolete ...... 40

2 Consensus 2018 35

24 31 40

Consensus 2018 Agenda

Sessions & Track Descriptions...... 46 Roundtables & Demos...... 58 Conference Maps...... 63 Exhibitor Locations...... 68

CONSENSUS MAGAZINE STAFF Editor-in-Chief: Art Director: Peter Bordes, VP of Events & Sales, CoinDesk Thomas Seltzer, Creative Director, Seltzer Creative Group Publisher: Associate Art Director: Jacob Donnelly, Director of Marketing, CoinDesk Olena Protsenko, Seltzer Creative Group Daria Sukovatitsyn, Trade Exhibition Manager, CoinDesk Nolan Bauerle, Director of Research, CoinDesk

TITLE SPONSORS

FOUR BLOCK SPONSORS

4 Consensus 2018 THREE BLOCK SPONSORS BITSANE

TWO BLOCK SPONSORS

An initiative of the BLOCKCHAIN RESEARCH INSTITUTE

Consensus 2018 5 BLOCK SPONSORS

The Secure Ledger of Things

MetlPy

6 Consensus 2018 ADVISORY BOARD

Michael Casey Michael Casey is chairman of CoinDesk’s advisory board and a senior advisor at MIT Media Labs’s Digital Currency Initia- tive. He also consults for businesses on the challenges and opportunities in blockchain and digital asset technologies. Formerly a columnist at The Wall Street Journal, Casey has authored five books, including The Age of Cryptocurrency: How Bitcoin and Digital Money are Challenging the Global Economic Order, published in 2015, and its follow-up, The Truth Machine: the Blockchain and the Future of Everything, which was released in February of 2018. Both were co-authored with Paul Vigna of The Wall Street Journal.

Mic Bowman Mic Bowman is a principal engineer in Intel Labs and leads the distributed ledger research group. Mic has spent over 20 years working on large-scale databases and distributed systems. For the last two years, he has served as a member of the Hyperledger Technical Steering Committee contributing to various aspects of architecture definition and evaluation of technologies for privacy and confidentiality. He is currently working on methods for improving the security, scalability, and privacy of distributed ledgers. He received his PhD in Computer Science from the University of Arizona.

Simon Johnson Simon Johnson is the Ronald A. Kurtz (1954) Professor of Entrepreneurship at the MIT Sloan School of Management, where he is also head of the Global Economics and Management group and chair of the Sloan Fellows MBA Program Committee. He co-founded and currently leads the popular Global Entrepreneurship Lab (GLAB) course. Johnson is a senior fellow at the Peterson Institute for International Economics in Washington, D.C., a co-founder of BaselineScenario.com, and a member since inception of the FDIC’s Systemic Resolution Advisory Committee. Johnson holds a BA in economics and politics from the University of Oxford, an MA in economics from the University of Manchester, and a PhD in economics from MIT.

Consensus 2018 7 ADVISORY BOARD

Balaji S. Srinivasan Balaji S. Srinivasan is the CTO of Coinbase and a Board Partner at Andreessen Horowitz. He was previously CEO at Earn.com, which was recently sold to Coin- base. Before taking the CEO role at Earn.com, Dr. Srinivasan was a General Partner at Andreessen Horowitz. Prior to joining a16z, he was the cofounder and CTO of Founders Fund- backed Counsyl, where he won a Wall Street Journal Innovation Award and was named to the MIT TR35. Dr. Srinivasan holds a BS, MS, and PhD in Elec- trical Engineering and an MS in Chemical Engineering from Stanford University. He also teaches the occasional class at Stanford, including an online MOOC in 2013 which reached 250,000+ students worldwide.

Maja Vujinovic Maja Vujinovic is an executive leader in both entrepreneurial and corporate environments. Starting as an entrepreneur in mobile payments in Sub Saharan Africa, Maja worked across five continents at the intersection of technology and infrastructure finance. In her past role as a Chief Innovation Officer of Emerging Tech & Future of Work at GE, Digital, she spearheaded the full vision and framework for blockchain and transformational change. She designed and ran pilots across treasury, aviation, energy and additive manufacturing addressing internal inefficiencies. Maja was a catalyst for ideas such as electronic wallet for autonomous machines in GE’s brilliant factory project. Maja is an investor and a CEO of OGroup, an investment firm and accelerator focused on emerging technologies such as blockchain and token economics.

Pindar Wong Pindar Wong is the Chairman of VeriFi (Hong Kong) Ltd., a discrete Internet Finan- cial Infrastructure consultancy. Pindar is an Internet pioneer, who co-founded the first licensed Internet Service Provider in HK and leads the “Belt and Road Blockchain Consortium.” Pindar also serves on the Hong Kong Government’s Committee on Inno- vation, Technology and Re-industrialiZation, as a Director of the Hong Kong Applied Science and Technology Research Institute (ASTRI). He also serves on the HK Trade Development Council ICT Services advisory committee and the HKUST School of Engineering Advisory Committee.

8 Consensus 2018 The World's Only Blockchain Solution for Antique & Art

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AACoin Exchange Insurance Service Antique & Art Service Center Valuation Service Antique World Allow members to exchange with Our insurance service system Social Media other virtual currencies and at provides our Our world-class team of analysts currencies. Using AACoin Wallet to members various insurance use the cutting-edge technology access, store, transfer and track packages on the antiques or and rigorous evaluation process arts in transaction, to provide the highest level of The entry point for all AACoin. The platform can be easily accessed through IOS APP, Android shipment, and storage. antique & art assessment service the systems in APP, and desktop/mobile web. to the members. Antique World. It is a multilingual social network platform designed for all antique and art lovers. It allows the Antique World members to look up the Antique & Art catalog of all the Auction Service Mortgage Service antiques and arts in the Antique World Museum Provide members the The auction platform and the estimated investment leverage by provide e-commerce features mortgage loans on their for the members to buy or sell values accordingly. antiques & arts, with the their antiques and arts, mortgage amount received, our payment processed with members would have more AACoins or USD. exibility to reinvest.

marketing.antiqueworld.com [email protected] @AntiqueWorldO cial @AntiqueWorldAW 800-988-8230 AMID CHAOS, OUR DECENTRALIZED FUTURE IS BEING BUILT By Michael J. Casey

If, during the Consensus conference in May 2017, I’d predicted the crypto and blockchain industry’s subsequent experiences, you wouldn’t have believed me. Artwork: Images Corbis AMID CHAOS, OUR DECENTRALIZED FUTURE IS BEING BUILT

If, during the Consensus conference in May 2017, I’d predicted the crypto and blockchain industry’s subsequent experiences, you wouldn’t have believed me.

ack then, CoinDesk’s Bitcoin Price Index was around $2,400. Six months later, it passed through $10,000—right B when 1,300 investors and financial professionals attended the inaugural Consensus: Invest conference. But that was only a way station to $19,783.21, an all-time high in mid-December. This came as the Chicago Board of Trade and the Chicago Mercantile Exchange launched bitcoin futures contracts, giving professional entities a vehicle for betting on the cryptocurrency. Come 2018, the entire mood shifted. Bitcoin lost two thirds of its value in less than four months as regulatory clampdowns in China, South Korea and the U.S. ensued. Bitcoin was not alone in this volatility, either. In the eleven months following Consensus 2017, $8.3 billion was raised in initial coin offerings, according to CoinDesk’s ICO Tracker. At its peak in early January, the market capitalization for all cryptocurrencies and digital tokens listed on coinmarketcap.com surpassed $831 billion, a 900% from May 2017. At the time we went to print it was at $431 billion.

Consensus 2018 11 AMID CHAOS …

With all this money being made recovery to higher highs came Most importantly, the Segregated and lost, and the “What the hell is much sooner than it did for, say, the Witness (SegWit) protocol upgrade going on?” questions it provoked Nasdaq, which took 15 years to top was introduced, which streamlined among the general public, Bitcoin, its dot-com bubble peak of March data management and enabled cryptocurrencies and blockchain 2000. The crypto markets may be other software improvements. technology were thrust into the redefining the nature of investment In particular, SegWit facilitated headlines. Suddenly, they were booms, speeding up the entire one the most exciting cryptocur- topics of conversation at dinner process of speculation, correction, rency innovations since Satoshi tables. Mothers were asking their retrenchment and recovery. Nakamoto’s white paper: the Light- crypto-obsessed teenagers what ning Network. Now live on Bitcoin, coin to buy. And those of us who’d Big Changes Under the Litecoin and other cryptocurren- floated around the space for some Hood, Too cies but still in its infancy, Lightning years were looked upon with Price, though, is a distraction. It is an off-chain payment channel intrigue: Are you one of them? A makes people miss the forest for solution that promises to signifi- bitcoin billionaire? (For the record, I the trees, overlooking the important cantly increase transaction-pro- most decidedly am not.) innovations on which the invest- cessing, enable derivative-like smart This level of public curiosity was ment ideas are supposedly founded. contracts, and lower costs. totally new. But the market mania So, we must note that amid all the Not to be outdone, Ethereum wasn’t, not for crypto. Ratio-wise, the money mania, big changes were developers introduced their own BPI chart of 2017-2018 looks similar also occurring with the development scaling initiatives. These included to the 12 months from April 30, 2013, of crypto technology itself. the Lightning-inspired Raiden and when bitcoin started at $144.30, In that same 12-month period, Plasma, which aimed to enable smart soared to $1,151.30 on December 4, the Bitcoin community’s three-year contracts at massive scale. Mean- 2013, and then slid to $445.87 on internecine war, otherwise known while, new projects from Polkadot, April 30, 2014, where it more or less as the “block size debate,” came to Ripple and Cosmos and others stayed for the rest of the year. The a divisive conclusion with a software sought cross-blockchain interoperability while still more worked on decentralized exchanges for custody-free token trading. The crypto markets may Meanwhile, businesses, NGOs and government agencies launched be redefining the nature of blockchain projects covering a smorgasbord of use cases. Almost investment booms, speeding every day a new private or public collaboration was launched for up the entire process of supply chain management, digital identity, land titles, trade finance, speculation, correction, commodity exchanges, decentralized electricity or additive manu- retrenchment and recovery. facturing. The UN, the IMF and the World Bank set up blockchain labs. Consortia comprising established companies, startups and even state same goes for the calendar year hard fork to create Bitcoin Cash, a governments and cities were formed 2011, when the price started at 30 new, competing version of Bitcoin to explore open-source standards in cents, peaked at $29.60 on June 8, with a larger block capacity. That energy, climate data, and the Internet and then closed the year at $4.25. left the community that supported of Things. People everywhere were I believe we were in a bubble the original small-block standard, striving to make blockchain go live. in 2017, but we were also in one in now known as Bitcoin Core, free to Many of these ideas are ahead 2013 and in 2011. In those two cases, incorporate code changes of its own. of their time, mostly because the

12 Consensus 2018 AMID CHAOS … underlying infrastructure, the proto- and self-regulating governing money also paid for the infrastruc- cols and programming rules that bodies to encourage standards, ture that would underlay Internet 2.0 govern platforms such as Bitcoin adjudicate disputes and disincen- post-bubble. It enabled algorithmic or Ethereum, aren’t sufficiently tivize wrongdoing. search, cloud computing, smart- developed for them. That they are phones, social media, big data and being proposed puts pressure on Welcoming the Bubble all the other functionality that have core blockchain developers. Unlike Although the hysteria ensures changed our way of life and made a the mostly academic and publicly this industry’s development won’t few titans of tech fabulously wealthy funded founders of the Internet, chart a methodical straight line, the and powerful. who worked for decades in rela- crazed market need not be viewed What’s the equivalent now? The tive obscurity before their work on as a negative phenomenon. capital unleashed by the crypto packet switching and the Transmis- Throughout history, the arrival bubble isn’t funding physical infra- sion Control and Internet Protocols of transformative technologies has structure but social infrastructure. was ready for the online boom in the been accompanied by Wild West- Token valuations might be out of nineties, blockchain developers are like speculation. It happened with whack with reality and imply big in the spotlight. The world is already electricity, with railroads and with losses for many. But they’re also demanding applications while highly speculative crypto markets want returns on their money. Having We don’t know what new hundreds of billions of dollars at stake does not make for an ideal, innovations will emerge, but tranquil environment for testing and developing software. it’s fair to say these early Still, developers have no choice. Like it or not, the ecosystem is innovators are laying the coming together at once rather than in sequence. Programmers and cryp- building blocks of our future, tographers are working on cleaner code, designing smarter security decentralized economy. solutions and installing faster transaction mechanisms at or on top of the base protocol layer, while estab- the Internet itself in the nineties. incentivizing global groups of inno- lished companies and startups are As the economist Carlota Perez vators to come together online, rolling out smartphone products explains, speculation and bubbles conceive of new decentralized at the higher, application layer. All are not just a byproduct but are a economic models, and codify those this is occurring as day-traders flip core feature of how new, disrup- ideas in open-source software. Their in and out of multiple crypto tokens, tive technologies are developed, startups may fail but their code will creating huge, distracting gyrations deployed and ultimately incorpo- be freely available for others to later in the developers’ own net worth. rated into our economy. work with, even more readily and Out of this chaos, order will even- Speculation unlocks cheap capital. cheaply than the dot-com era fiber tually come. It will partly be forced Much of it just lines the pockets of helped Google, Facebook and co. by regulators like the Securities and early investors in crazy, overvalued in the 2000s. We don’t know what Exchange Commission, which will proposals such as Pets.com in 1999, new innovations will emerge, but set rules and enforce them, hope- but it also funds real, valuable infra- it’s fair to say these early innovators fully without killing innovation. Order structure. In the dot-com bubble, are laying the building blocks of our will also come from the community money went into physical infrastruc- future, decentralized economy. itself, driven by the demands of the ture: fiber-optic cable, giant server market. We need best practices for farms, research into 3G mobile tech- The Big Idea token-issuing startups, software nologies. People lost billions on At times like this, there’s a broad audits and other quality assurances, silly ideas in the nineties but their understanding that something big

Consensus 2018 13 AMID CHAOS … is happening. It’s just hard to predict life. Without bookkeeping, modern they don’t trust each other. its economic impacts. So people society simply couldn’t function. Blockchains promise to supplant throw scattershot money at every- We’d have no idea of who owes this centralized approach with a thing. Inevitably, their bets over- what to whom and of how much distributed, shared ledger whose shoot and prices decline. That this is value to assign to the assets of indi- updates follow a robust, ongoing going on in crypto is perhaps vindi- viduals, companies and entire econ- consensus in real-time. At any given cation of the underlying technolo- omies. It’s how we overcome the time, everyone who’s with access can gy’s importance. core challenge of mistrust among know the current state of agreed-to This begs some fundamental strangers, the means by which we transactions and balances. No more questions: What is the paradigm reach agreement on sets of facts need for weekly, monthly, quarterly, shift, the big idea that breeds such and make exchanges of value. This or annual reconciliations and audits. excitement? Why, after almost ten is the stuff of civilization. Anything The entire rhythm of our financial years is the market assigning $159 that transforms this function is, by system could change. billion of value to a digital asset definition, extremely important. And it’s not just financial data. based on a software system that Until now, we’ve had to rely on Valuable information of all kinds no one controls? What’s so special, centralized ledger keepers, essen- can be tracked in this decentralized anyway, about a decentralized, tially requiring us to trust the say-so manner. It includes the online data censorship-resistant system of of those who control the books. that defines digital identities, titles value exchange? We’ve assigned regulators and audi- to assets, and compliance infor- The big, underlying idea, I believe, tors to randomly check their work, mation. It could disintermediate is that blockchain technology can but for the most part we are blind to middlemen of all stripes because, upend not just the business models the accuracy of the data, beholden by having a decentralized algorithm of recent decades but a millennia-old to what the bookkeeper tells us. resolve our mutual mistrust rather societal practice of deep signifi- This siloed recordkeeping results than depending on all-knowing cance to civilization. Its decentral- in a “cost of trust” that takes many centralized ledger-keepers, we can ized structure portends a profound forms. One is found in financial crises, trade directly with each other. When change in ledger-keeping, a such as that of 2008, when society this system is reliably attached to trusted devices in the Internet of Things, it could even allow for machine-to-machine trade. Such a transformation points to It’s hard to overstate how unimaginable new efficiencies. It could create untold new forms of important ledgers are to value. And it could massively disrupt existing businesses and jobs. our way of life. Without These prospects have stirred a hive mind of dreamers and fueled bookkeeping, modern society an unprecedented bout of economic speculation. We don’t know where simply couldn’t function. it’s headed. But we sense something profound is afoot. Blockchain is a software technology, but its sweeping potential dramatic re-imagination of society’s lost faith in the ledgers produced by has fostered a giant sideline industry methods for tracking and assigning banks such as Lehman Brothers and of speculation and ideation. As the value. It overturns the centralized the Royal Bank of Scotland. Another technology “goes live,” this hurly model installed with the first ledger, is less obvious: the endless work of burly process of creative innovation the Code of Hammurabi, which was millions of accountants at businesses and destruction will only intensify. founded around 1754 BC in Babylon. around the world, each reconciling That’s both exciting and daunting, It’s hard to overstate how their company’s books to those of but it poses massive potential important ledgers are to our way of their counterparties. Why? Because payoffs. Join us for the ride.

14 Consensus 2018 Signs of Maturity for Bitcoin and Other Digital Assets

BY HADLEY STERN, SVP AND MANAGING DIRECTOR, FIDELITY LABS

ur Chairman and CEO, Abby One year later, as we gather as a community We are still building, laying the foundation Johnson spoke at Consensus last again, do these four challenges continue? that will enable scalability and wider year to acknowledge the potential Which have changed? adoption. for the innovations we’re exploring. Abby shared stories from a few I see signs of maturity. Yes, many obstacles The excitement to date has largely been of our bitcoin and blockchain experiments, and remain, and the work we are all doing is focused around retail investors, and addressed the barriers – or “blockers” – that challenging and remains largely undefined. institutional groups have watched patiently. needed to be addressed before this future is Yet, we have come a long way in one year. Are we nearing readiness of enterprise- realized, including those related to technology, ready tools and solutions for digital assets? Government regulators in several countries regulation and the user experience. I – and my colleagues – remain optimistic. have published their opinions, and financial services regulators are starting My team and others within Fidelity have Technology. The tradeoffs between to recognize the need to further explore worked for several years to envision a future scalability, privacy and peer-to-peer the developments where the promise of settlement being made. I’ve “What if this could do for some form of these new had the chance to the transfer of value what digital assets is mature, Policy. Innovation in this space is fast- meet with several accessible and a key part moving and is often outpacing regulation. such regulators here the internet did for the of our customers’ daily We continue to work with regulators and in the U.S. and am transfer of information?” lives. We have been policymakers to have an open dialogue encouraged to see working to help create ABBY JOHNSON, CONSENSUS 2017 and to find solutions to protect customers’ a true willingness to that future as well, both interests, but there is more work to be done learn and understand. in allocation of resources It appears these conversations will continue and the talent we’ve brought together to Control. Networks like Bitcoin and Ethereum with people across our community. build, experiment, learn, and build again. by design have no formalized management structure. Are these systems growing with the We believe policymakers must provide We are deep in several projects, some right level of governance where needed? clear and consistent guidance, both from of which we just aren’t ready to discuss regulator-to-regulator and from jurisdiction- yet, so we’ll be watching alongside you at Human. Blockchain was created for and by to-jurisdiction. Inconsistent policy guidance Consensus this year, eager to hear what new each of us. However, we need to come up will create confusion and hesitancy, stifling developments are on the horizon. with systems and products that are more innovation by firms interested in exploring adaptable and bring joy to users these new and emerging technologies.

We were here one year ago to ask the Blockchain We’re seeing OTC desks, the establishment What obstacles do you think community to collaborate around the hard of new exchanges, decreased volatility, conversations, to join us in addressing these rollout of futures trading, and clearer remain for bitcoin? guidance from a number of U.S. states. blockers with other businesses, with regulators, Find us online and let us know: and with each other as we all work toward While current solutions are largely solutions. imperfect, these are all signs of progress @fidelitylabs that provide both encouragement and Many responded to our invitation to collaborate frustration to those of us who are working in @HadleyStern and discuss ideas to overcome these challenges. this every day.

Fidelity Labs is a Fidelity Investments company. Fidelity Labs provides innovative products, services, content and tools, as a service to its affiliates and as a subsidiary of FMR LLC. Based on user reaction and input, Fidelity Labs is better able to engage in technology research and planning for the Fidelity family of companies. 841201.1.0 Photo: Shutterstock

a last-mile delivery driver. Were ADAPTING BLOCKCHAIN each of these participants able to gain near real-time insight into our FOR IoT: ESTABLISHING purchase and its progression from factory to front door, they might TRUST AMONG THINGS be able to collaborate to optimize multiple independent systems near by Mic Bowman, Principal Engineer, Intel Corp; Advisor, CoinDesk real-time to get me the product and Camille Morhardt, Director of IoT Strategy, Intel Corp as fast and in as good condition as possible—especially if there The edge is messy. And the edge, where are unforeseen setbacks en route, such as a flat tire!—while preparing billions of interacting devices that will make for their next order. up the Internet of Things will reside, is Yet the formation of these networks is rife with problems. In where IoT data is generated and acted upon. the best case, information collected, shared, and acted upon is inconsis- here are often no secure physical perimeters where the raw sensing of tent in quality and availability. In the T the physical world takes place: on rooftops and space stations, inside worst case, it provides a completely mines and aircraft engines, on container ships and solar panels. Even edge new attack vector for malicious counterparts that aggregate, filter, normalize, and increasingly interpret data participants. When Things plan or send it to a cloud for additional analysis are often mobile, have intermittent and act on our behalves, we want connectivity, and are subject to shock, vibration or extreme temperatures. assurance that the data they utilize As Things increase their connectivity and intelligence, so too will our demand to make decisions is trustworthy. for them to autonomously form networks, exchange information, and coordi- Ensuring that information is nate action on our behalves. When we order an article of clothing online, for trustworthy is hard enough when example, we indirectly call on, among others, a fashion designer, raw goods a central authority orchestrates suppliers, logistics companies, customs, a distributor, an importer, a buyer, an device configuration, data collec- inventory management system, a customer management system, a bank, a tion and cleaning, and data dissem- web management system for product placement and pricing, a retailer and ination. However, distributed

16 Consensus 2018

ADAPTING BLOCKCHAIN FOR IoT networks can’t rely upon a central ascribe all authority to the block- For example, a blockchain can accu- authority. Traditional means to assert chain, we believe IoT applications rately record the transfer of access and verify participant identity and must achieve a balance of authority. rights to a piece of information that integrity fail, because participating asserts that a container was shipped Things are made by different manu- Technology across town. However, a blockchain facturers, run different operating Requirements is unable to assert the authenticity systems, communicate with different Establishing trust in the information of the GPS readings captured in the protocols, and act on behalf of shared among Things creates new shipping record. different owners who have different requirements for blockchain tech- Purists from the cryptocurrency motives. The answer may well lie in nologies. Generally, blockchain tech- world will argue that a “permis- the emerging technology that has nologies operate as an authority for sioned blockchain” is an oxymoron; become known as “blockchain.” well-defined, deterministic systems. however some form of identity verification is required for participants who join the network so they can trust the information the Thing contributes to the collective. This Blockchain offers hope for expressing demand has led to the formation of and establishing shared trust private, permissioned, closed, and enterprise blockchains—all variants in information created and on the theme of restricted participa- tion in the distributed network. There exchanged by Things. is another possibility that Things may be identified or otherwise certi- fied to contribute information to an otherwise public blockchain—some Blockchain—or distributed ledger However, information created by sort of hybrid model that attempts to technologies in general—offers Things sits outside the blockchain validate input but not restrict input- hope for expressing and estab- and is notoriously ambiguous and ters. Other possible solutions involve lishing shared trust in information non-deterministic. Providing infor- the use of anonymous credentials created and exchanged by Things: mation assurance for qualitative and verifiable claims. the immutable log of events that is data imposes new requirements on the blockchain provides a means to the technology. Requirement 2: establish authoritatively the prov- Controlled Access to enance of information; to record Requirement 1: Information is Critical and enforce policies for accessing Identity and Reputation of Typically, blockchain transactions the information; and to act on the Participants is Central to Trust are transparent. The introduc- information autonomously through and Must be Exposed tion of smart contracts that codify “smart contracts.” Public blockchains like Bitcoin typi- and execute detailed agreements However, while there is tremen- cally provide a history of the trans- between participants complicates dous promise, blockchain technol- actions on assets while anonymizing this notion. Businesses don’t like ogies must evolve substantially to (or at least attempting to hide) the to share confidential data with meet IoT’s unique demands. The identity of those performing the competitors. Smart contracts will unique characteristics of IoT appli- transactions. For IoT applications, be powerful tools in IoT, particu- cations impose both technical and however, information becomes larly in supply chains that include economic requirements that lead more complex than simple owner- third party logistics companies. It’s us to conclude that IoT applica- ship of an asset. In particular, most quite common for disputes to arise tions must be situated within an information generated at the edge is at handoff points where there is economic, legal and regulatory strongly qualitative; and once infor- transfer of custody of an asset. The context that extends beyond the mation becomes qualitative, its prov- ability to prove that the temperature blockchain. In particular, whereas enance—including the identity and of the container remained within traditional blockchain applications reputation of the source—is critical. contract parameters should allow

18 Consensus 2018 Secure the User. Secure the Blockchain.

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www.myetherwallet.com ADAPTING BLOCKCHAIN FOR IoT immediate trigger of payment. Or simultaneously expands confidenti- of ownership of assets). However, conversely, proof that the good ality risks. Ledger replication offers data from the edge is often messy. spoiled under party eight’s custody a wide surface area for attackers Precision and accuracy are limited in a twelve-party supply chain that seeking access to individual nodes’ by the physical capabilities of the all participants can view will quickly sensitive data.) Thing. And information generated resolve finger pointing. And this at the edge is subject to a variety proof must be constructed without Requirement 4: Connectivity is of malicious attacks that are difficult revealing additional confidential Intermittent; Action Must be to detect. The messiness of data information. For example, if an orga- Taken When Disconnected created (and consumed) by Things nization is collecting bids on produce Intermittent connectivity seems leads to a level of ambiguity and that was in that container, the orga- paradoxical to the Internet of Things. non-determinism that conflicts with nization may not want all bidders to As Jacob Morgan defined IoT in blockchain technologies. Consider, see every bid or to know the final Forbes in 2014, “Simply put, this is for example, a smart contract that sale price. In general, the informa- the concept of basically connecting adjusts the target speed of vehicles tion shared through transactions is any device with an on and off switch on a road based on measured traffic subject to a potentially complex set to the Internet (and/or to each other).” flow. Weather issues that affect the of access policies. The IoT community spent a lot of accuracy of the flow sensor might time espousing pervasive connec- trigger adjustments in the target Requirement 3: tivity and a reduction in transmis- speed that are unintended. A more Efficiency Matters sion and storage costs; however troublesome example might occur Another core principle of blockchain we now confidently make tradeoffs when automatic payments are trig- is redundant compute and storage: between connectivity and battery gered when a shipping container every participant processes all trans- life, connectivity and transmission arrives at a facility. A faulty RFID actions and maintains the ledger, cost, connectivity and infrastructure reader could report the existence creating an ever-growing demand cost. There are many, many edge of a container that has not actually for storage across the network. In nodes which by design receive or arrived triggering an inappropriate IoT, where lightweight nodes at the send data only intermittently and transfer of funds. edge frequently have extremely in small quantities. In essence, the Often, some form of external limited storage and compute power same forces that drive autono- recourse can audit and prescribe (because their primary purpose is mous interaction to the edge also corrective transactions that address to sense raw data as economically require blockchains to accommo- these problems (though this as possible), IoT blockchains will date connectivity constraints. implies the existence of an external likely need to recognize the variety authority). However, issues arise of nodes in the network and their Requirement 5: where the information itself is prob- relative capabilities. The blockchain Actions Must be Reversible lematic. For example, personal infor- itself may need to orchestrate which To this point, the requirements we’ve mation might leak into a transaction; clients act as lightweight nodes, and discussed have been rather periph- the effect of GDPR and other privacy which act as validators. eral to the core of blockchain tech- regulations may require that infor- Further, we are likely to see an nology, focusing on performance mation be removed from the record. increasing variety of consensus and deployment characteristics; this This problem is not unique to IoT mechanisms that do not require one, however, represents a funda- applications though we expect it to massive quantities of compute mental shift in one of the central be more common in them. power or specialized hardware, and tenets of the technology. Specifically, are thus easier to scale or run on blockchain technology is founded Economic existing deployed equipment. (Note, on the principle of immutability; Requirements also, that while redundancy is often once something is committed to the Beyond the technical requirements viewed as a feature for blockchain log it never changes. This principle is are simple economic barriers to integrity, one that increases the cost particularly appropriate for preserva- blockchain adoption in IoT. Enter- to a malicious actor that seeks to tion of a record of unambiguous and prises are familiar with centralized break network consensus and intro- deterministic events (such as trans- systems and in traditional, linear duce fraudulent transactions, it also actions that represent the transfer supply chains, they work well. When

20 Consensus 2018 Transform risk and complexity to your advantage

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441581-2018-PwC Blockchain Conference Ad.indd 1 4/4/2018 8:46:02 PM ADAPTING BLOCKCHAIN FOR IoT there is a strong purchaser at one incumbent entity to set up the infra- Finally, we will likely see commen- end of a supply chain, there is every structure to distribute orchestration. suration of data generated at the reason for that entity to simply set Blockchains are uniquely suited to edge—not just across autonomous up a distributed database (that it micro-transactions, so scale may Things or organizations, but across autonomous ecosystems. At this point the blockchain will be more efficient than centralized systems Devices will autonomously at managing the complexities of non-linear supply chains, managing form communities, exchange identity, provenance, shared data sets, and running smart contracts. information and present us While we will be trusting machines to make some decisions and take with options. some actions on our behalves, businesses in IoT will always want to retain the ability to revoke or reverse the actions taken by a smart manages centrally) and require all help solve this problem. The IoT contract, since humans are noto- vendors participating in its supply community has seen a few subscrip- riously bad at contingency plan- chain to enter their data into it. Until tion models and nonprofit models. ning or future prediction, and the we enter the realm of multiple over- However, until there emerges a equipment that will be acting on our lapping ecosystems and complex clear, repeatable, compelling busi- behalves will also often be respon- non-linear, dynamic supply chains ness model, adoption of blockchains sible for keeping us safe. (think: distributed manufacturing for IoT will be slow. with over a dozen contributors to Over the next couple of years Recommendations any given Thing printed, each with we will likely see an increasing We often talk about a blockchain as a unique IP, equipment, and certi- number of pilots and small scale replacement for a trusted third party fications), it is difficult to find an deployments using the technology for interactions within a community; economically compelling use for in sub-optimal usages, e.g. stan- that is, the community ascribes to the truly decentralized ledgers. dard supply chains with a dozen or blockchain ultimate authority about However, the competitive envi- so participants to improve speed “truth.” For applications built around ronment in which these incumbents of asset tracking or provenance a network of Things, however, the operate in is rapidly changing, with and reduction of disputes through blockchain must be situated within 3D-printing enabling distributed audit—all important advances in IoT. a much larger context that incor- manufacturing, and barriers to In these early trials, industry and porates institutional relationships, entry around machine learning and ecosystem leaders will seek to prove legal requirements, and regulatory other fast-developing technologies cost savings or incremental revenue. control. lowering. To compete, enterprises We will then witness the evolu- There is a very real danger for may be forced to adopt more open tion of standards that allow for cross those deploying blockchain-based systems. The IoT industry is inevi- organizational device identity and solutions for IoT to believe that the tably expanding into more complex configuration, with early methods tamper proof nature of the block- ecosystems. As a result, we expect for partitioning workloads across the chain provides assurances about compelling use cases for blockchain variety of IoT devices, and protecting the integrity and trustworthiness will become more apparent. data or its meta-inputs via linked of information (and about actions Herein lies a conundrum. Single trusted execution engines or reten- driven by that information). A more strong purchasers orchestrate tion of encrypted states as data realistic view is that the role of the ecosystems around a supply chain moves across edge, fog, and cloud blockchain transitions from a source because they accrue revenue by nodes. Devices will autonomously of “shared truth” about the state doing so. Distributed collabora- form communities, exchange infor- of a system to a log of “decisions tion results in distributed value, so mation, and present us with options and actions” that might need to be there is little incentive for any single, for action based on their interactions. adjusted in the future.

22 Consensus 2018

Artwork: Shutterstock

was not until almost exactly 20 CAPITAL SET FREE years later that a physicist even conceived of exactly how a chain By Simon Johnson, the Ronald A. Kurtz (1954) Professor of Entrepreneurship, reaction might take place. MIT Sloan School of Management Wells was wrong, of course, about all the details. Anyone who In 1913, H.G. Wells wrote The World Set imagines the future of technology will necessarily mess up on all the Free, a chillingly prescient set of predictions small stuff. The more interesting about the development of technology. question is: if we understand the bigger shifts, can we predict at least the direction of future ublished in early 1914, this slim volume called it exactly right on the change? And—much more diffi- P coming dominance of aircraft in warfare, the ways armies would adapt cult—if we can see where this new (or not), and even some of the geopolitical implications. Most astonishingly, breed of digital, blockchain-based Wells also predicted that atomic bombs would soon be dropped from the air tokens might lead or what they on civilian populations—and that this would change everything. could become, could we glean any As we grapple with the potential future of crypto-tokens and related develop- insight into when big things might ments, Wells’ volume—and particularly the way he thought about the future— happen? bears closer consideration. What we do know is that one The remarkable point about Wells’ reasoning is that he jumped directly feature of this technology is from the fairly rudimentary pre-World War One knowledge of radioactivity already triggering a societal and and atomic structure to the idea that within this science lurked an explosive economic shift before our eyes: device of devastating power. In retrospect, this might seem obvious, but it Initial Coin Offerings. While it will

24 Consensus 2018 Blockchain Technology & Digital Assets

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Schulte Roth & Zabel LLP New York | Washingon DC | London www.srz.com The contents of these materials may constitute attorney advertising under the regulations of various jurisdictions. CAPITAL SET FREE take some time, if ever, before this that in a way that the value gener- or killed by trains in the early days), technology’s advocates realize ated by that technology is shared the concentration of power (e.g., their vision for tokens to forge a with early users (and others who are build railway monopolies and jack new system of economic exchange willing to provide risk capital at this up prices), a boom-bust cycle (which and governance, ICOs are making development stage). can even bring down the financial waves right now. Access to capital for risky system and have broader delete- There is obviously a lot of debate ventures is a key constraint both for rious macroeconomic effects). about the precise nature of Initial the development of individual firms We responded over the following century or so with various “soft” or institutional innovations that started ICOs offer a more direct route in the private sector but ultimately acquired the backing of govern- for both tapping and deploying ment. Dangerous behavior was constrained through the award of funds, for matching founders legal damages and through the protections demand by trade unions. with investors. That turns out The predatory pricing behavior of trusts was limited by law and by to be quite revolutionary. the executive—Teddy Roosevelt’s first antitrust action was against a regional railroad monopoly. A Coin Offerings, including whether and for our economy-wide process central bank was created because, or not they constitute securi- through which new technology following the panic of 1907, no one ties offerings in the eyes of the reaches the market. ICOs offer a was confident that purely private law—which, in the U.S., the Secu- more direct route for both tapping mechanisms could prevent collapses rities and Exchange Commission and deploying funds, for matching in a severe panic, and securities interprets and applies in the first founders with investors. That turns regulation emerged because the instance, subject to legal appeals out to be quite revolutionary. consequences of the Crash of 1929 and political discourse, of course.) proved so devastating. David Moss’s I’m not a securities lawyer, and I History Repeating compelling book on the rise of the am not here taking a position on In the nineteenth century, before U.S. federal government is aptly this question. there was a boom in industrial titled, When All Else Fails. Instead, let’s focus on what development projects, we built a Seen in this context, how should promoters of ICOs say they are lot of railroads in Europe and the we see ICO—joint stock compa- trying to do by selling digital tokens United States. The legal form varied nies, or railroad ventures, or some to the public—and what appears somewhat across jurisdictions, but combination of both? We don’t know to have caught the attention of every country that made progress yet for sure, but we can see more investors. While many will describe in raising capital did so through clearly the problem that is being their tokens not investments but as some form of Joint Stock Company— addressed—it is relatively hard to pre-sold, negotiable “products” with liability for investors was limited, and raise early stage capital, and under a utility function that gives the holder ownership shares could be traded in the existing venture capital model it access to the system’s services, so a relatively efficient forms. helps to be located in one of a few far the most disruptive aspect of this Of course, there was madness places (e.g., Silicon Valley broadly idea lies in how it changes the fund- and also bad behavior during various defined, Boston, and New York). raising dynamic. And on that score, railway manias. And we learned What about all the people with the idea is relatively straightforward: the very hard way that unfettered good ideas who live elsewhere? And someone will build a technology that competition can lead to some prob- what about investors who would like could be useful to you and others, lematic behavior, either in terms of to take some well-considered risk and that person would like to prefund safety (a lot of people were injured but who are not considered qualified

26 Consensus 2018

CAPITAL SET FREE under the existing, rather antiquated but not limited to Bitcoin. Their Still, it is sudden change that rules (which are based entirely on speeches are quite different but generally proves most difficult to how much “investable” wealth you both are wonderfully erudite and handle, and there are good reasons have). Or what if you have an idea elegantly constructed. They focused to think we have some time before that, for whatever reason, is not on primarily on the future of money, at the full implications of ICOs (and their the current wish list for the people least as they define it. Anyone inter- institutional grandchildren) are upon who run VC funds? ested in this space should carry us. The SEC will apply existing rules in a judicious manner—investors really do need protection, and there It is hard to think of an instance is actually bipartisan support on this point. The Commodity Futures of technological change in Trading Commission may well weigh in regarding how particular instru- modern America that has not gone ments should be traded. The leadership of both organizations seem, through some phase of exuberance, at this time, to be paying close and sensible attention to developments. followed by consolidation and— It should not surprise us if, in our sometimes—eventual impact. usual empirical and haphazard way, we find a path along which regulation can support more decentral- If there are barriers to entry into copies with them at all time. As Oscar ized and lower cost ways of raising venture capital, as seems plausible, Wilde suggested, it is important to capital. Gate-keepers in the financial it is fairly straightforward to reason have something sensational to read world, who do well by controlling that there are very high returns in the train. various bottlenecks, will come under to capital in this sector, at least on Or you can read H.G. Wells. increasing pressure. average and over a sufficiently Predicting a limited future for a new Whatever happens, we should long period of time. Who is able to way of raising capital today is rather always expect a boom-bust cycle. participate in those opportunities, like hearing about the properties of It is hard to think of an instance of i.e., invest in a VC fund? Not most radium in 1898 and remarking, “is technological change in modern people who are reading this column. that all it can do?” America that has not gone through To be sure, there are many prob- Now, it’s true that anyone who some phase of exuberance, followed lems to be solved along the way to was concerned about the health by consolidation and—sometimes – ICOs—or anything that descends implications and other unintended eventual impact. from them—allowing for a more consequences of discovering radio- democratic approach to risk-taking. active elements was exactly right— What We Can Prepare There may be scams or weak and should have been listened for governance or just bad ideas—we to more carefully. Carney and If better access to risk capital lies in have seen plenty of each in every Carstens make some good points in our future, what can we say about previous investment boom. And, this regard. when this might happen? to be clear, in any such emerging And—this is a point nailed by This is the hardest question, and market situations, you really can Wells—any sufficiently profound likely not a good idea to take (or bet lose everything you risk, without development in technology cannot on) a strong view. With regard to the recourse or recompense. avoid having major effects on the future of power generation, trans- Picking up on some of these risks, structure of society, including the portation, and warfare, H.G. Wells Mark Carney, governor of the Bank value of firms and who has (and was right on the natural course of of England, and Agustin Carstens, keeps) a good job. All such effects science—he picked the 1930s as key head of the Bank for International are inherently hard to predict. To decade for applications to emerge Settlements, weighed in recently those who wish to hurry change—be from the theory of atoms—but he against crypto-currencies, including careful what you wish for. completely failed to anticipate how

28 Consensus 2018

CAPITAL SET FREE much the process could speed up raising capital and, most likely, an None of this means that utopia is once the resources of a well-run associated change in how corporate around the corner or that productivity country were applied to a problem governance operates. Fundamental growth is about to jump upwards. with single-minded concentration, issues surrounding the protection In The World Set Free, H.G. Wells i.e., the Manhattan Project. of privacy will need to be dealt with was too optimistic about the future Wells also thought—and this is along the way. A host of related of benevolent government, and we interesting for the ICO context—that issues to be addressed include would do well to avoid that mistake. once one country had acquired the precise nature of disclosure, But the way capital finds and destructive nuclear technology, what meaningful reporting through supports opportunities around the almost all countries in the world financial accounting means, and world is not just changing—it has would follow suit. He was wrong how markets obtain and respond already changed. Spend some time about that. Similarly, with economic to information. thinking through the implications. and financial innovations, there are We should probably also rethink ICOs offer a more direct route plenty of reasons why some coun- what kind of investment portfolios for both tapping and deploying tries will struggle to emulate the are recommended at different stages funds, for matching founders with leaders—typically because local of life. Who should be regarded as investors. That turns out to be oligarchs prefer the status quo. an accredited investor, for example quite revolutionary. In the end, some relatively in a technology they know well—and It is hard to think of an instance prosperous countries—this could when they are in their early twenties of technological change in modern include the U.S. or perhaps smaller (so there is plenty of time to ride the America that has not gone through countries with less of a stake in the cycle)? Investors need protection, some phase of exuberance, followed existing global financial system— but against what and through what by consolidation and—sometimes— will end up with a better way of methods exactly? eventual impact. Photo: Shutterstock

on future rather than present utility. AND WHAT HAS THE But even if we grant this claim for the sake of argument, stating that BLOCKCHAIN EVER most of the value of blockchain lies in the future is not the same DONE FOR US? as saying that (a) the present-day utility of the blockchain is zero or by Balaji S. Srinivasan, CTO, Coinbase that (b) the blockchain sector will never live up to its valuation. The new digital gold standard? Well, of In this piece, we review some of the reasons why new technolo- course. That goes without saying! gies like the blockchain are often heavily criticized en route to ubiquity. We then discuss the specifics n Monty Python’s Life of Brian, there’s a famous scene in which John of how the blockchain has already I Cleese’s character is stirring up a group against the Romans. He’s begun disrupting at least three trying to get them all frothed up about the supposed righteousness of their multibillion dollar verticals: the gold cause and the uselessness of the Romans, until reality intrudes. One by one, industry, international wire trans- members of the crowd begin listing off all the things the Romans actually fers, and crowdfunding. Finally, we have brought to the community, from roads to medicine to sanitation, thereby talk through a few objections, and contradicting his criticism and undermining his point. conclude by discussing the areas I’m reminded of this scene when surveying much of today’s commentary where the blockchain may provide on blockchain technology. There’s no dearth of intelligent and thoughtful yet more near-term 10X advantages. people claiming that the blockchain is bad, or that it has no use, or that it’s bad and has no use. Fad, Bubble, Monopoly It’s an odd situation, because while businesses in the blockchain sector Highly valuable technologies typi- are already empirically generating billions of dollars in revenue, the value of cally experience relentless nega- digital currencies and assets is often said to be driven largely by speculation tivity on the way to the summit.

Consensus 2018 31 WHAT HAS THE BLOCKCHAIN EVER DONE FOR US?

High growth is matched by high Despite piling up 500 million users processions of the prominent were volatility and even higher expec- in six years, in 2010 people were trotted out to denounce the heresy. tations, leading to hype cycles and still calling the company a bubble Hundreds of obituaries and dozens periods of apparent overvaluation, that would never live up to the of “bans” later, of course, Bitcoin is until eventually the technology is outlandish $33B valuation that now worth many billions of dollars. It globally ubiquitous. Then the new people had placed on it. This narra- hasn’t just survived but has thrived, critique is no longer about faddish- tive still held as late as August 2012, and has given rise to Ethereum and ness or lack of utility but about ines- as Facebook’s stock plummeted dozens of other coins and chains. capable monopoly, until the next after the IPO and it was an open But it’s far too early to declare disruption appears on the horizon question as to whether they’d be victory. No longer dismissed as a and the cycle begins anew. able to monetize on mobile. By 2017, passing fad, and not yet attacked as a dominant monopoly, today’s argument against the blockchain sector is that it’s a bubble without real use. No longer dismissed as a passing After all, the blockchain space as a fad, and not yet attacked as a whole is worth hundreds of billions of dollars, but where is the utility? dominant monopoly, today’s What are the daily use cases? What justifies this value? Why is it not just argument against the a bubble now and forevermore? blockchain sector is that it’s a The Blockchain Has Already 10X’d bubble without real use. Gold, International Wire Transfers, and Crowdfunding One example of this with the of course, Facebook made $15B in So let’s talk about the successes earlier internet revolution can be net income in just one year. Now the of the blockchain to date, as those seen by comparing IT Doesn’t questions of whether social media often go without saying. There are at Matter (published in the trough of is a fad or Facebook is overvalued least three multibillion dollar sectors the dotcom bubble in 2003) to The have silently faded away. The new where the blockchain has provided Shallows (written after social media question is whether Facebook is an quantifiable 10X improvements over and web 2.0 had re-emerged and unstoppable monopoly that requires the preceding technologies. These proven themselves in 2011). The government regulation. This may are digital gold, international wire first book argued that software was be a legitimate question; however, transfers, and crowdfunding. no longer a source of competitive it is a wholly different one from the advantage and that the internet contention that social media was a A Better Gold revolution had been overhyped. mere trifle or passing fad. First and perhaps most obviously, The second book, by the very The blockchain is already midway Bitcoin is a better gold. Wences same author, argued that soft- through a similar path. Lest we Casares of Xapo gave the canonical ware companies were now too forget, Bitcoin was initially dismissed presentation on this several years successful and the internet revolu- as something that could never ago. Being digital, Bitcoin is infinitely tion was causing a fundamental shift work due to its deflationary mining lighter than gold of the same value. in society. While the theses were schedule. Decade-old macroeco- Large amounts of money can be mutually contradictory, the one nomic textbooks were quoted like quickly transported across borders, common thread was unremitting holy scripture, as if “Econ 101” was easily 10X faster than the equivalent negativity towards the then-new relevant to Nakamoto Consensus amount of gold can be moved. And technology called the internet. and the solution of the Byzantine Bitcoin is significantly more subdi- Another more recent example Generals Problem. Tulips were visible and liquid than a gold bar. is with Facebook and social media. waved like cloves of garlic. Endless Even given Bitcoin’s recent issues

32 Consensus 2018 WHAT HAS THE BLOCKCHAIN EVER DONE FOR US? with transaction fees and wait times obvious how many people are using tech know of Kickstarter, Indiegogo, (already partially obviated via Light- Ethereum in this way, it is obvious and GoFundMe. But when consid- ning), the technical advantages that it’s far better than wires for ered internationally, the sector is vis-a-vis gold are obvious and at those that are. To gauge how wide- even bigger than you might think. It this point well-nigh indisputable. spread this use case is, we spoke to was estimated to be in the billions The gradual replacement of gold by Peter Smith, CEO of Blockchain for annually and growing fast even Bitcoin on many balance sheets and this article, who noted that “a signif- before January 2017. And then came in a wide variety of financial contexts icant fraction of our tens of millions the year of ICOs and token sales. is now just a matter of time and institutional inertia. Given that the total value of gold is estimated to range into the trillions of dollars, scaling The sheer speed of the transaction the digital gold application alone can justify the total market cap of the increases the velocity of business and blockchain sector. the trust between geographically A Better SWIFT Second, consider international wire distributed partners. transfers. If two startups or contrac- tors on either side of the world want Forget same-day transfer; this is to transact and if both parties are same-minute transfer. aware of cryptocurrency, Ethereum is increasingly their medium of choice. The reasons for this low-pro- file revolution in global money trans- of users are using the Blockchain With almost nine billion dollars mission are simple: Ethereum settles Wallet to enable large, fast cross- worth of token sales and ICOs in roughly 14 seconds, works 24/7 in border transactions. We may publish consummated within the span of any country, allows instantaneous statistics on this in the future.” about a year, we have entered a generation of receiving addresses, In theory, this use case will soon completely new age for crowd- and is now fairly well known in the face competition from banks, who funding. To put this in perspective, tech community. Thus, if you can will adopt SWIFT gpi and bring just three years ago Ethereum itself email someone, you can send them settlement times down. But in prac- raised about $15 million in what $50,000 in Ethereum about as tice international wires still take was then one of the largest crowd- quickly and easily as you can send multiple business days to clear funders of all time. But the advent them an attachment. while Ethereum reliably clears within of ICOs and token sales completely This allows medium-scale inter- seconds—and has for years. Ethe- demolished all previous records. national deals to close in realtime. reum also saves both parties a trip As with gold and international wire The vendor emails over an Ethereum to the bank during business hours, transfers, the use of blockchain address, and the customer Docu- as ETH transactions can be sent technology empirically introduced signs a contract and sends the Ethe- between any pair of devices at any a 10X improvement, allowing inter- reum. Receipt is confirmed over the time of day. In this case, the real national crowdfunders on the scale phone as both parties hit refresh on world utility of a blockchain-based of hundreds of millions of dollars to Etherscan. The sheer speed of the technology has actually been unde- occur for the first time. And thanks transaction increases the velocity rhyped. It is already 10X faster than to the blockchain, tens of millions of business and the trust between SWIFT, and has been for some time. of dollars from all around the world geographically distributed partners. could now be sent and settled within Forget same-day transfer; this is A Better Crowdfunder 30 seconds. same-minute transfer. As a third example of what the Please note: remarking on these We’ve personally seen this exact blockchain has already done for us, totals is meant to offer neither praise use case many times. While it’s not consider crowdfunding. Most folks in nor criticism of the specific projects

Consensus 2018 33 WHAT HAS THE BLOCKCHAIN EVER DONE FOR US? which have raised these funds. It is the claim that “nobody has come up regulatory issues surrounding ICOs simply important to note that block- with a use case for blockchain after and crypto-crowdfunding, we’ll have chain-driven improvements in crowd- 10 years”, as the number of parties to spend time with policy makers funding technology have enabled that can benefit from these three and heads of state. financings of an unprecedented use cases includes every entity with But these kinds of objections miss scale and speed, literally 10X larger gold on the balance sheet, every the forest for the trees. A new tech- and faster than what came before. business with transnational trade, nology is typically not mildly superior And while many regulatory issues and every organization raising to an existing technology in every respect, but is instead 10X better on one key axis. That 10X improvement draws customers and provides A new technology is typically the capital and rationale for fixing the other defects. The early iPhone camera is a good case in point— not mildly superior to an while far worse than a dedicated digital camera in most respects, it existing technology in every had one 10X advantage going for it: its ubiquity as a bundled piece of respect, but is instead 10X a network-connected smartphone. That led to a rapid rise in use and a better on one key axis. concomitant rapid investment in the feature set of network-connected, phone-based cameras. We’re seeing still need to be worked out to fully money online. While scaling the a similar phenomenon with block- mainstream ICOs and token sales, it blockchain-driven 10X advantages chain-based technologies, where is quite possible that the blockchain out to all these entities will doubt- their 10X advantages mean they are will go on to transform not just crowd- less take some time, it will also reli- gaining ground despite their largely funding, but venture capital itself. ably generate billions in value. remediable flaws.

So the Blockchain But These Technologies Aren’t In Conclusion Future is Already Here Superior in Every Respect! There is no dearth of articles on how The three application areas outlined Another counterargument is that the the blockchain will eventually disrupt above—digital gold, international new technologies are not superior everything. I actually believe we wire transfer, and crowdfunding— in all respects. What about Bitcoin’s will see most of the envisioned use demonstrate that blockchain-driven volatility? What about the fact that cases come to pass, though some 10X innovation is already here. The everyone doesn’t yet accept Ethe- will take years or decades to fully remaining obstacles are related reum in lieu of a bank-based wire play out and will go through multiple to execution and distribution. The transfer? And what about the regu- iterations before succeeding. Over fundamental zero-to-one innovation latory issues surrounding crypto the next few years, I’m particularly in these areas is no longer in ques- crowdfunding? bullish on Ethereum games and tion and has been obvious to people Each of these are legitimate blockchain-based social networks in the space for years. objections, for which we can furnish and marketplaces. answers. To address volatility we But that long-term bullishness But the Blockchain Future Isn’t need companies to sell the tradi- comes from an empirical reck- Evenly Distributed! tional instruments for managing oning with the concrete successes One counterargument is that these volatility, like collars. To get more that the blockchain has put on the 10X improvements may indeed exist, folks to accept crypto as a means board to date. It is only because but not everyone can yet avail them- for international wire transfer means the blockchain has already done so selves of them. Note, however, that getting more users for exchanges much for us that I expect it to do so this is a significant step back from on both sides. And to address the much more.

34 Consensus 2018 Photo: Shutterstock

compliance and on-boarding can’t MANUFACTURING AND keep up. Blockchain technology, with its decentralized, consen- BLOCKCHAIN: PRIME sus-based approach to proving the veracity of each users claims and statements, offers a promising TIME YET TO COME solution—with the added bonus By Maja Vujinovic, CEO, OGroup that it might also foster a more equi- table world. Manufacturers cannot Since the Industrial Revolution in the 18th depend on blockchains alone to make their operations more and 19th centuries, manufacturing has expo- manageable—no one technology or business model will singlehand- nentially increased in volume and demand; edly solve these issues—but they supply chains have grown ever more should all be looking closely at their potential. complex, and industry has progressively required less direct manual labor. A Challenging Environment If we applied the 20th –century o add even more complexity, we now have a need not only for supply logic of the corporate bottom line to T chain management (SCM) but also for business process outsourcing, as the current outlook, it would seem well as for corporate social responsibility and sustainability. To succeed, one bright, with population growth must continuously innovate and keep up with a rapid technological change. pushing the manufacturing industry One outcome of this radical uncertainty for businesses is that they face an into a constant quest for efficiency, increasingly wide and diverse cast of counterparties, which is forcing them reliability, seamlessness and speed. to rethink their trust infrastructure. Existing, time-consuming approaches to Some 27% of manufacturers across

Consensus 2018 35 MANUFACTURING AND BLOCKCHAIN the globe estimate an increase in 2025. Fleet management in trans- hackable – both your own and those revenues of 10% or more per year portation, security and surveillance of your business partners -- which in the next five years, according applications in government, inven- means your business is still at risk. to Industry Week. Thirty percent tory and warehouse management There’s a dire need to find additional, of manufacturers expect revenue applications in retail and industrial comprehensive enterprise solutions growth between 5 and 10%. The asset management in primary manu- to security, ones that go beyond problem is that this growth comes facturing will be the hottest areas simply building an ever bigger wall with major challenges, especially in for IoT growth. All of this will require to keep the attackers out. the face of resource shortages and faster, more transparent processes Blockchain technology seeks environmental and efficiency imper- and transactions throughout the to address these problems via a atives. Companies are catching on supply chain. common data architecture that lets to the fact that their SCM must be Today, manufacturing compa- non-trusting parties more securely share information. Blockchains are designed to permanently record transactions -- not merely currency Deferring questions of trust to transactions but, importantly, also in exchanges of data – in such a way a decentralized algorithm that that the record cannot be tampered no one party controls could both with. This stands in contrast to centralized databases, which can be advance transparency along existing altered after an entry has been made. This unique design means that block- supply chains and allow for more chains can enhance trust among organizations and add another fluid, dynamic supply chains. layer of security and reliability to a supply chain’s information system. By deferring questions of trust to anticipatory, adaptive, and environ- nies are investing heavily in trusted a decentralized algorithm that no mentally aware to achieve business supply chain networks, which one party controls, they promise to sustainability. And even then, there involves on-boarding new suppliers both advance transparency along is still friction and waste from time through a laborious due-diligence existing supply chains and allow for lags, price arbitrage, and opacity. and compliance process. They more fluid, dynamic supply chains All these challenges must be solved do this to meet some of the core in general. For producers and within the context of an ever-wid- needs in any manufacturing supply consumers alike, the gains could ening array of possible business rela- chain, including the responsive- be manifest in improved traceability tionships as supply chains become ness of chain partners to changing of goods and work processes and, increasingly complex in a dynamic, production needs, the traceability ultimately, in greater efficiency and rapidly changing environment. of goods and processes along the lower costs. Businesses that can’t adapt will chain, surveillance of counterfeiting, be surpassed as their compet- and protection of IP and assets. In The Benefits of itors deploy new tools, such as investing in these exclusive relation- Blockchain Technology the Internet of things, predic- ships, companies develop strong A much-discussed facet of block- tive analytics, satellite data, and bonds of trust and centralized asset chain-based SCM is that tamper-ev- blockchain itself. These technolo- control based on individual enter- ident distributed ledgers can gies drive efficiency but are also prise solutions. These relationships potentially improve traceability and forcing transparency. And change provide a sense of security, and yet establish the provenance of goods is happening fast. IHS forecasts, for that security is typically only as reli- from start to finish. Tracking of example, that the IoT market will able as the firewall each partner has the sourcing of raw materials, the grow from an installed base of 15.4 in place. As demonstrated by data countries of production, inspec- billion devices in 2015 to 30.7 billion breaches at Home Depot and JP tions, transit methods, duration devices in 2020 and 75.4 billion in Morgan, all firewalls are eventually and environmental factors can all

36 Consensus 2018 MANUFACTURING AND BLOCKCHAIN be updated instantly to a block- workflow; this workflow is then trig- made possible, giving lenders and chain that is transparent and trust- gered when a producer submits the big companies the confidence to worthy. For the potential benefits packing list for whatever commodity inject financing and other forms of consider just one problem facing or good is being delivered to the liquidity into supply chains. This the global economy: that of pirated shipper. As subsequent steps in could in turn help smaller suppliers goods, which the Organization for the supply chain are sequentially overcome their persistent working Economic Cooperation and Devel- completed, the documents are capital challenges. In a related opment (OECD) estimates account obtained and distributed, allowing field, blockchain systems could also for nearly half a trillion dollars a year. all participants in the process to enhance predictive analytics, by In the automotive industry alone, it see what has been submitted, which firms can collect data, model has been estimated that counter- who submitted it, and when it was it, generate statistics, and then use feiting costs $12 billion dollars in submitted. No one participant can those statistics to make data-driven lost sales annually, impacting up to alter a record without consensus business decisions. Since block- 200,000 jobs.1 And in pharmaceu- from other parties on the network. chains record each point in a process, ticals, there’s an epidemic of drug Another exciting supply-chain they can provide verifiably accurate overdoses that is in part attributed advantage of blockchains lies in data to determine statistical patterns to counterfeited drugs. how businesses can manage ever- in anything from customer behavior But the potential benefits go more-valuable data. In today’s 4th to risk exposure. beyond provenance. Blockchains Industrial Revolution, where data When combined with rapid devel- may also become a vital enabling is becoming the true gold, it will opments in IoT, this technology will component of moves to enhance increasingly need to be exchanged eventually lead to full transactional automation along supply chains, in efficient and collaborative ways. autonomy for machines. They will since they can directly help to automate the agreements upon which automated transactions “Data collateralization” could give will be based. Here the answer is likely to lie in blockchain-based lenders and big companies the “smart contracts,” which ensure that pre-agreed obligations can be confidence to inject financing into executed in an entirely program- mable manner. Under a smart supply chains. This could help contract, all parties to an agreement can be satisfied that payouts smaller suppliers overcome are delivered legitimately without the adjudication of a time- and their persistent working capital cost-consuming middleman. And challenges. since blockchain-secured smart contracts trigger transactions only after prescribed criteria are met by Much of it will be generated by manage their own digital wallets, signatories to the agreement, they automated devices, ensuring that loaded with cryptocurrency or can mitigate the risk of relying upon the Internet of Things will need an specialized supply-chain tokens— other parties to deliver on their accompanying “Ledger of Things” something I got GE to do in a pilot commitments. to keep track of machine-to-ma- during my tenure there. Consider In one example, the shipping chine exchanges of valuable infor- this scenario: A machine could run its company Maersk it testing a block- mation. In other words, it will need a own predictive analytics, conclude chain-based approach through blockchain. that a replacement part is needed a partnership with IBM to put all When information is protected by a certain time and then auto- documents involved in bulk ship- through this secure, multiparty matically place an order and pay for ping into a single template based on system, “data collateralization” is the part through a pre-established

1 Ford website

Consensus 2018 37 MANUFACTURING AND BLOCKCHAIN smart contract with a parts supplier. So, regardless of what evidence computer networks, are inherently Imagine the cost and time savings the pilots provide, a challenge will slower than centralized databases. that would afford. continue to lie in enticing firms to use As such, some argue that a distrib- it. Several practical considerations uted ledger that feeds into a central- Adoption? Not So Easy will dictate how quickly companies ized database is all that is needed to So far, much of the potential for adopt this technology and trans- maximize a supply chain. This over- blockchain solutions for SCM form their processes. It is easier to looks the public verifiability, integrity remains theoretical. The jury is still implement blockchain for intangible and transparency that blockchain out on whether blockchain tech- goods than for material ones, for provides, but it also argues for nology actually is the fix it prom- example. And for tangible goods, it’s nuanced decision-making around ises. We’re awaiting the results relatively easy to apply the technol- technology choices. of pilots by IBM, Maersk, GE and ogy’s provenance-tracking where a The bottom line is is that blockchains are best suited where robust- ness, disintermediation, security, proof of source, and proof of the In reality, the problem is that chain of custody are priorities. If speed is a greater priority than any innovation is difficult for problem of mistrust in the database manager, a blockchain may not be established players, especially the best fit, at least within the technology’s current state of develop- when it threatens to disrupt existing ment. Still, as the cryptographic layer work processes in which many jobs advances, with new “off-chain” solutions such as the Lightning Network and incomes are connected. promising to greatly improve transaction speed, processing capacity and cost-effectiveness, and as new IoT solutions improve the security others. Blockchain advocates talk single material—auch as diamonds and speed of machine-to-machine enthusiastically about reducing or fish—is being traced along a chain. communications, blockchain solu- waste, increasing efficiency and But as my colleagues and I discov- tions will become increasingly more providing greater control over ered with GE’s highly complex supply viable. And the more that big IT supply chains, all because the chains for large industrial assets service provides such as IBM and technology can boost business such as airline engines and wind Microsoft implement blockchain partners’ capacity and willingness turbines, it’s much harder to track business solutions, the more scal- to share information. the iterative delivery, processing and able and necessary the technology Yet while SCM experts often assembly of raw materials and parts will become. decry the fact that supply chains into intermediate good that eventu- are overly complex and inefficient, ally become finished products. Looking to the Future many companies tend to view the Paradoxically, although a According to a recent report status quo as acceptable, repeating blockchain could make informa- published by Tractica, enterprise the mantra, “If it’s not broken, why tion-sharing much easier across such applications of blockchain across fix it?” In reality, the problem is a complex set of actors, overcoming the globe will see growth in annual that innovation is difficult for estab- the trust challenges across so many revenue from $2.5 billion in 2016 to lished players, especially when it parties makes it hard to implement $19.9 billion in 2025.2 Separately, a threatens to disrupt existing work the technology in the first place. 2015 World Economic Forum Report processes in which many jobs and We should also note that block- stated that approximately 10 percent incomes are connected. chains, which depend upon multi- of GDP will be stored on blockchain

2 According to a recent report published by Tractica, enterprise applications of blockchain across the globe will see growth in annual revenue from $2.5 billion in 2016 to $19.9 billion in 2025.

38 Consensus 2018 MANUFACTURING AND BLOCKCHAIN technologies by 2025.3 Are these greater cross-business collabora- will go somewhere else? Blockchains forecasts too optimistic? Too pessi- tion and engagement become have significant potential to help busi- mistic? It is, of course, impossible to possible, which accelerates inno- nesses comply with those demands. answer those questions in a multi- vation and opens up new business By deferring questions of trust to a polar world that makes it ever harder opportunities. decentralized algorithm that no one to predict the future. What’s also certain is that there is party controls, [blockchains] promise What we can say is that wide- an unprecedented speed of change to both advance transparency along spread adoption of blockchain in this and other technologies aimed existing supply chains and allow for ledgers could have widespread at the manufacturing industry. The more fluid, dynamic supply chains in benefits for the global economy, question for any company leader general. especially if it helps establish new confronting this environment is: When information is protected standards in trade and manufac- how to ignite urgency within their through this secure, multiparty turing. We could achieve much organization and incentivize their system, “data collateralization” is higher levels of security protection employees to be entrepreneurs made possible, giving lenders and for sensitive data, with a model within, so that they keep up with big companies the confidence to that’s superior to both firewalls technological and business changes. inject financing and other forms of and non-disclosure agreements. Customers today are requiring liquidity into supply chains. This And, by extension, if we can create faster, safer delivery, consistency, could in turn help smaller suppliers a more secure environment for security, reliability, accountability overcome their persistent working communicating with each other, and quality and if not received, they capital challenges.

3 A 2015 World Economic Forum Report states that approximately 10 percent of GDP will be stored on blockchain technologies by 2025. Artwork: Shutterstock

this disruption. It provides the MAKING TRADE enabling platform on which a new dynamic, highly fluid global system WARS OBSOLETE for exchanging value will emerge, one that’s far outside the purview By Pindar Wong of the World Trade Organization’s current “rules of origin” model. On Hainan Island, China’s Hawaii, in the Trade warriors are fighting yester- day’s battles. Instead of pitting their shadow of sanctions, tit-for-tat tariffs and a smokestack, 20th-century factories looming trade war, China’s paramount leader and armies of workers against each other, governments should apply stood up for globalization last month by blockchain’s ‘Don’t Trust, Verify’ launching a surprise defense of world trade. approach to trade arrangements, using it to reduce trade friction and L audable though his position might be, Xi Jinping’s bargaining position— improve cross-border relations to and that of Donald Trump—may soon be irrelevant. the betterment of their societies. A confluence of technologies is poised to dramatically reshape the world of What might the roadmap look manufacturing and, in the process, render obsolete the existing international like? That’s what an ad hoc group trade regime. A few get a lot attention: the rise of 3D printing, the application of Hong Kong’s leading strategists of Internet-of-Things (IoT) devices to shipping and logistics, the increasing and business thinkers set out to prevalence of artificial intelligence and machine learning. But it’s blockchain define when they started meeting technology, with the capacity it gives to non-trusting parties to transact with privately in late 2016 to explore each other by relying on a common source of digital truth, that will facilitate how to fully digitize trade among

40 Consensus 2018 MAKING TRADE WARS OBSOLETE the 65-plus countries involved in actually administered by Coin- “opt-in” approach inspired by the China’s “Belt and Road Initiative.” Desk, Inc., the US company, and not Internet Corporation for Assigned The Belt and Road Blockchain someone else. Names and Numbers (ICANN), which Consortium, as our group came to As for the data validity issue, we successfully managed a similar be known, recognized that as supply found that it was useful to borrow global policy endeavor for domain chains evolve into highly automated, some of the thinking behind tradi- names. data-driven ecosystems, they will tional finance notions of security, Other standards will also need need the transparency, immutability and accountability that blockchains provide. We felt the history of the Verifiability and Validity Internet’s development offers a Already, large-scale enterprises like Walmart, IBM and Maersk are deep in useful framework for addressing blockchain-for-supply chain research and a clutch of exciting startups the question of legal verifiability. such as Provenance and Skuchain are building blockchain-based tools for the supply-chain management industry. But the consortium recog- specifically the KYC, or know-your- to emerge in related industries to nized two important barriers to the customer concept. The intersection ensure all parties have confidence widespread adoption of a global of IoT with blockchains drives a need in the data being shared in a block- blockchain-based trade architec- for hardware integrity, which we call chain environment. Of particular ture. The first concerned the desire KYM (know your machine). The need value was the foundation last year for legal certainty, and independent for a mechanism for online dispute of the Global Smart Container Alli- verifiability, of unique blockchain resolution (ODR), one that lies ance in Shenzhen to drive standards identifiers, which are currently often outside of the blockchain in ques- both for smart shipping containers represented as QR (Quick Response) tion, also became apparent to us. that record and report the ambient codes. The second concerned the In that case, the blockchain would state of their cargo and for “E-locks,” liability and validity of data written provide initial evidence to lower the which are used to electronically seal to an immutable blockchain, specif- cost of establishing “matters of fact.” the container for faster customs and ically what to do in the case of erro- Any new, blockchain-based duty clearance. Since March 2016, neous—let’s call it #FakeData. governance system for the Belt and E-locks have been successfully We felt the history of the Inter- Road community will need a reliable, used between the customs author- net’s development offers a useful trusted jurisdictional home. And for ities of Hong Kong and Shenzhen, framework for addressing the ques- that we highlighted a key role for China’s Silicon Valley. By combining tion of legal verifiability. We saw Hong Kong, with its access to the legal certainty with cryptographic that verifying a blockchain address free and open Internet, its common certainty, the Belt and Road Block- is conceptually similar to resolving law heritage, and a business credo chain will not prevent trade disputes cross-border accountability issues of “public governance/private busi- from occurring—they will—but when with Internet Domain Names, which ness.” Thus we argued that resolving they do the cost and complexity identified a need for a Blockchain the “verifiability and validity” issues of having them will be dramati- Naming Service (BNS), with common could be addressed by developing cally reduced. And that’s good for business identity standards to inter- open standards for online dispute business. face with sovereign company regis- resolution of blockchain identifiers tries. Under this model, if coindesk. under HK Law, with legal certainty Toward “Pull” Demand com wanted to operate a bitcoin provided by its Electronic Trans- Chains wallet, anyone should be able to actions ordinance (Cap 553). We One exciting, highly disruptive verify that a bitcoin address was adopted an open “bottom-up” outcome of blockchain integration

Consensus 2018 41 MAKING TRADE WARS OBSOLETE into global manufacturing and trade “pull-based” Demand Chains used in e-commerce thrives is because it is the prospect that businesses will e-commerce. is relatively inexpensive to stock move from “push” supply chains to Demand chains optimize “made- digital bits on computers compared “pull” demand chains. This is the idea to-order” manufacturing, and with stocking analog atoms in ware- that production will be configured in customer fulfillment, to maximize houses. As such, it makes sense to response to—or pulled by—customer product “variety not volume.” To offer an overwhelming variety of demand rather than pre-configured get an idea of how this alters the products. The assumption is that any on anticipation of what customers current logic of trade rules, imagine logistic complexity can be managed want and then pushed onto them. we are fully immersed in the era of through computerized automation, More than anything, it is going to 3D-printing and IoT-driven manu- throwing in more computers and make trade spats like that of the U.S. facturing and a footwear maker software as needed to scale. More and China redundant. gets a Request for Quotation (RFQ) importantly, products offered can be Blockchains’ role in this is to for a batch of customized cleats for “pulled” into production only after help market participants break up Brazil’s national soccer team that they have been sold. There are several commercial benefits to this approach. For Demand chains are particularly suppliers, there’s an immediate gain in that they get the money up useful when accurate sales forecasts front. Secondly, because they now know real-time sales demand, they are unavailable and demand is avoid the common “bullwhip effect” problem encountered in traditional variable. “made-to-stock” supply chains. This occurs when errors in forecasting demand are amplified up the supply long value chains into shorter ones, must be rushed in time for next chain, leading to increased waste with financial exchanges acting month’s World Cup. The cleats might the higher upstream you go. With as bridges between them. This be “Designed In China”—the home demand chains, suppliers see “effec- should result in greater liquidity of the intellectual property—but tive demand,” not forecasted demand. and enhanced price and market “Made in Brazil” by a trustworthy 3D One can view demand chains discovery. I call this “packetizing risk” printer somewhere in Rio to produce with packetized risk as an evolution as the system can automatically the product and fulfill this order. of “just-in-time” manufacturing, as dispense fine-grained rewards that Demand chains are particularly they add in the important element of can be traced back to the original useful when accurate sales forecasts automated “just-in-time” financing. rights holder based on the presen- are unavailable and demand is vari- This wouldn’t be possible without tation of appropriate cryptographic able. Unfortunately they are fragile; a blockchain, since it can automati- evidence. A model like this could, for any unexpected supply disruption cally reward participants without the example, have allowed businesses risks stopping the whole manufac- risk of funds being stolen or unduly waiting on the delivery of goods turing process, leading to dreaded withheld. trapped on the creditor-seized ships “stock-outs.” By packetizing risk Another potential benefit: saving of the bankrupt Hanjin Shipping and increasing a pool of potential the environment. This stems from a Company in 2016 to liquidate their KYM-ed suppliers, blockchain may rather non-obvious feature of “pull” positions by selling tokenized rights finally enable demand chains to demand chains and the exchange to those immobilized goods. It’s a scale beyond their traditional trust markets that power them: the demonstration of how finance can limits and challenge traditional long- concept of “reverse logistics,” which be unfrozen at intermediate stages standing trust relationships. covers all operations involved in along the chain, breaking them up, Demand chains exploit that the return or reuse of products and facilitating more flexible and fact that digital trade dramati- and materials. One might create efficient means of aggregating the cally changes cost equations and an exchange for a product’s reuse, kinds of suppliers that operate in the economics. A key reason why recycling or upcycling. Doing so

42 Consensus 2018 MAKING TRADE WARS OBSOLETE might incentivize the creation of the now trace and cascade back any economic relevance, relative to the “circular economy,” greatly improving royalties to the appropriate benefi- impact of digital innovation. Already the resource usage with potentially ciaries, forging a powerful new way the root cause of labor disruption huge environmental benefits. In this model, products are not optimally priced for the point of sale, but for There is an opportunity for a one step beyond the sale—the point of reuse. Taking this idea further, grand bargain between the world’s manufacturers might be encouraged to make a market in their own two great trading powers to establish products where it is cheaper to design a product for durability, and rules for trading in Intangible buy it back, rather than design for Property using a global blockchain- planned obsolescence that exter- nalize the environmental costs. based trade architecture. Since 2017, the Europeans have had a bold plan to kill “planned obsolescence” and encourage products to reward the creative process. MIT worldwide, digital automation will that are end-user serviceable. A researcher Prema Shrikrishna calls have an accelerating impact on blockchain-based model of demand this “IP over IP” (Intellectual Property people’s lives and livelihoods. chains, with the added kicker of over the Internet Protocol), where The real danger for policymakers tokenized incentives, could help manufacturing “supply” moves adja- lies in not recognising when a tech- them get there. cent to market “demand.” nical innovation is fundamentally Thus the very nature of trade changing the underlying archi- Trade == IP Exchange changes from shipping tangible tectural assumptions, and brings Cryptocurrency exchanges, which property in containers (atoms) to with it changes in market structure now cover more than 10,000 unique intangible property in packets (bits). and competitive landscape. Rarely digital assets, can be thought of This has huge ramifications for the does a bell ring to tell you it’s as providing a market mechanism international trade policy regime. underway. That’s what the onset for pricing intangible property, (IP). It’s unclear how the existing trade of blockchain technology portends. (Note: I am deliberately applying the rules under the World Trade Organ- Governments must have their eyes acronym “IP” to a wider definition isation’s Rules of Origin will apply and ears open. of assets beyond “intellectual prop- in such cases or whether countries As for the immediate future there erty” since most cryptocurrency will strategically hoard raw materials is certainly a risk of a US-China technology is based on open-source such as rare earth elements. Given trade war, with Hong Kong possibly software). the glacial rate of WTO negotiation caught in any crossfire. Yet there is We now have an opportunity to rounds, measured in multiple years, also an opportunity for leadership extend this approach to on-demand it is hard to see how the existing and for a grand bargain between the Industry 4.0 manufacturing technol- regulatory regime will adapt to a world’s two great trading powers ogies such as 3D-printing. Here, the world where manufacturing, trade to identify a common interest in only element that is “shipped” is a and retail are “all digital,” even establishing new rules for trading in digital design, whose provenance less so to a world where smart Intangible Property using a global can be tracked to the original author containers and packages automati- blockchain-based trade architecture. of the work using a blockchain (e.g. cally route themselves to their most Of the two outcomes, it’s clear to me ascribe.io). A blockchain might also profitable market. that a trade war is not only power- act as a market, one that functions This emerging paradigm suggests less in the face of a dramatically like an efficient collecting society that divergences in manufac- changing economic architecture but since the monetization event occurs turing processes and costs—and even more dangerous than ever to long after the original creation was the nation-state-led trade wars common wellbeing. So to all you made. With a blockchain, we can they trigger—will have decreasing trade war warriors … “Ding Dong!”

Consensus 2018 43 Diginex_Magazine AD_14 April 2018.indd 4-5 15/4/2018 11:32 PM Diginex_Magazine AD_14 April 2018.indd 4-5 15/4/2018 11:32 PM Diginex_Magazine AD_14 April 2018.indd 4-5 15/4/2018 11:32 PM SESSIONS & TRACK DESCRIPTIONS See maps on pp. 63–67 for location details

MONDAY, MAY 14, 2018

7:00am 7:00am - 7:00pm REGISTRATION 2nd Floor Promenade

7:00am - 8:30am BREAKFAST Americas Hall 1 & 2 (3rd Floor)

8:30am 8:30am - 8:50am Opening Remarks & State of Blockchain Grand Ballroom, 3rd Floor Kevin Worth, CoinDesk Nolan Bauerle, CoinDesk

8:50am 8:50am - 9:00am Blockchain Week NYC Kick-Off Grand Ballroom, 3rd Floor Deputy Mayor Alicia Glen, New York City

9:00am 9:00am - 9:10am State of the Blockchain World Grand Ballroom, 3rd Floor Don Tapscott, Blockchain Research Institute

9:10am 9:10am - 9:40am Fireside Chat with Fedex Grand Ballroom, 3rd Floor Don Tapscott, Blockchain Research Institute (m) Robert B. Carter, FedEx Frederick W. Smith, FedEx

9:40am 9:40am - 10:20am Fireside Chat with St. Louis Fed Grand Ballroom, 3rd Floor Diane Brady, dB OmniMedia (m) James Bullard, Federal Reserve Bank of St. Louis

10:20am 10:20am - 11:00am NETWORKING BREAK

46 Consensus 2018 Schedule | Monday, May 14

TRIANON BALLROOM MERCURY BALLROOM GRAND BALLROOM EAST GRAND BALLROOM WEST

11:00am 11:00am - 11:40am 11:00am - 12:30pm 11:00am - 11:40am 11:00am - 11:40am How Governments use the Scaling, Layer 2 and Equity or Coins? The Token Economy Technology Cryptographic Innovations Innovation in early stage Like Michael Casey’s Coindesk While there’s a near constant Detailed walkthroughs of finance shot to global attention column, “The Token Economy,” discussion around how this innovative approaches to solve and fuelled a boom from the this panel will track the big technology will be regulated, some of the most important first killer app for blockchain problems, the big ideas and the there’s much less discussion challenges for developers. technology. This boom forced real solutions that can enable a a steep learning curve on positive economic transforma- around how governments Amy Yin, Coinbase venture capitalists and other tion. The author and advisory actually use the technology. Dr. Muneeb Ali, Blockstack From digital fiat currency to investors who suddenly need a board chair leads a discussion Eli Ben-Sasson, StarkWare asset management to land titles plan to adapt and compete with with prominent industry devel- Christian Decker, Blockstream and smart contracts that capture a global market. These three opers, investors and entrepre- regulatory compliance goals Alin S. Dragos, MIT Media Lab investors developed strategies neurs who have clear ideas in programmed transaction early and had a tremendous about the new incentives and authorizations, this panel will perch to understand all the economic forces unleashed on track some of the latest devel- change. This panel tracks their the world. opments in the regtech field. “ah-ha” moments, how they’ve Michael Casey, CoinDesk managed change, and what this Marc Hochstein, CoinDesk (m) Advisory Board, MIT Media Labs innovation means for the invest- Wendy Henry, Deloitte Digital Currency Initiative (m) ment industry going forward. Jennifer O’Rourke, State of Brian Hoffman, OB1 Illinois Noelle Acheson, CoinDesk (m) Matthew Roszak, Bloq Jamie E. Smith, The Linux Kavita Gupta, ConsenSys Jennifer Zhu Scott, Radian Foundation and West Exec Jalak Jobanputra, Future\ Partners Advisors Perfect Ventures Maja Vujinovic, OGroup, LLC Catherine Wood, ARK Invest

11:40am 11:40am - 11:50am NETWORKING BREAK

11:50am 11:50am - 12:30pm 11:50am - 12:00pm Mining Boom Remarks by the Premier of “If you don’t find a way to make Bermuda money while you sleep, you Hon. E. David Burt, JP, MP, will work until you die.” Early Bermuda miners heeded Warren Buffet’s wise words and were among the first successes in the market that grew around bitcoin. Their successes led to specialized equipment with a high upgrade frequency, energy powerhouses that aim to lure miners, and new jobs with forks, new blockchains, and staked nodes. This panel will cover an industry that seems set for unlimited growth. Jacob Donnelly, CoinDesk (m) Igor Lebedev, SONM Gideon Powell, Autonomous Crypto Corp Marco Streng, Genesis Mining

Consensus 2018 47 Schedule | Monday, May 14

TRIANON BALLROOM MERCURY BALLROOM GRAND BALLROOM EAST GRAND BALLROOM WEST

12:00pm 12:00pm - 12:30pm 12:00pm - 12:30pm? Blockchain Governance — First the Rest, Then the A Legislator’s Perspective West? Legislators have a unique role In the early days of Bitcoin, to play in the development of there was an idea that the lack the blockchain revolution. The of incumbent financial infra- incredible power of cryptog- structure in some developing raphy placed in the hands economies was an opportunity of individuals is at once a for cryptocurrency innovation challenge for KYC compliance to blossom. Nature abhors a and an opportunity to reestab- vacuum, after all. That lure lish the privacy of individuals. In attracted some of the brightest this new world, legislators must minds in the business. This create tools to fight money laun- panel brings these pioneers dering and terrorism financing together to hear their thoughts while also protecting against after four years of development identity theft. This panel looks and entrepreneurship to find out at the high wire routine of both if these markets will lead inno- a US and EU legislator as they vation for the rest of the world. seek this balance. Bailey Reutzel, CoinDesk (m) Perianne Boring, Chamber of Jed McCaleb, Stellar Digital Commerce (m) Development Foundation Eva Kaili, European Parliament Sunny Ray, Unocoin Rep. David Schweikert, U.S. Elizabeth Rossiello, BitPesa House of Representatives

12:30pm 12:30 pm - 1:30pm LUNCH Americas Hall 1 & 2 (3rd Floor)

1:30pm 1:30pm - 2:10pm 1:30pm - 3:50pm 1:30pm - 2:10pm 1:30pm - 2:10pm Real Property All Kinds of Funds The Race Towards Changed Face of ID The real estate industry is A sophisticated buy-side Interoperability Cryptographic authentication on the cusp of tremendous emerged from cryptocur- Between all the public and baked into every operation change as a result of blockchain rencies’ turbo-charged year. private chains, there exists a remains one of the forces technology. This panel convenes This workshop is a series of tangle of platforms that have behind the enthusiasm for startups that have conducted presentations from some of made tradeoffs between secu- blockchain technology. These property sales that include legal the professional players in the rity, privacy, efficiency, flexibility, builders have worked from title transfers, and highlights space as they discuss the prob- ease of use, and governance. this foundation and created progress to add fractional expo- lems they solved to launch, their This panel will look at the ability powerful tools that are ‘just-in- sure and crowdfunded projects investment theses, and other for these chains to interoperate time’ solutions to the growing to the solutions tokenization can new developments from their as an important scaling solution threats to privacy and can achieve. suddenly crowded ranks. unlocked from new network bring efficiencies to markets Amanda Wood, REBNY (m Meltem Demirors, Athena effects: assets transferred from at a global scale. From the Natalia Karayaneva, Propy, Inc Capital one chain to another, escrow integration of machines into our commercial relationships to George Kikvadze, BitFury Jordan Clifford, Scalar Capital schemes, ‘identity chains’ linked digital wallets and new bespoke Perrin Quarshie, Real Blocks Daniel Dehrey, Silicon Valley to a commodities market, and chipsets, this panel will describe Bank other types of data flow. their work and what a world Zach Hamilton, Airfoil Capital Rachel Rose O’Leary, CoinDesk built from their tools would look (m) Joey Krug, Pantera Capital like. Travis Scher, Digital Currency Charlie Lee, Litecoin Foundation Marc Hochstein, CoinDesk (m) Group David Schwartz, Ripple Ken Huang, TheKey.Vip Bart Stephens, Blockchain Matthew Spoke, AION Capital Dr. Jutta Steiner, Parity Vinny Lingham, Civic Technologies Technologies Joseph Weinberg, Shyft Network Inc.

48 Consensus 2018 Schedule | Monday, May 14

TRIANON BALLROOM MERCURY BALLROOM GRAND BALLROOM EAST GRAND BALLROOM WEST

2:10pm 2:10pm - 2:20pm NETWORKING BREAK

2:20pm 2:20pm - 3:00pm 2:20pm - 3:00pm 2:20pm - 3:00pm Secure, Decentralized Global Jurisdictions Content Monetization and Connected Car Networks The global, borderless nature of True Net Neutrality Car makers have partnered with blockchain technology remains While there’s a political debate startups to deliver solutions to a challenge for individual going on around net neutrality, a number of obstacles: data jurisdictions. Nations have it amounts to little more than gathering for autonomous car taken a patchwork of different who gets to profit from content tests, new fractional owner- approaches, which has led creators: internet service ship models for the sharing to discussions self regulatory providers or platform providers economy, and tools to identify organizations. This panel like YouTube and Facebook. responsibility between firm- convenes the technical, regu- This panel convenes a group of ware, hardware, software and latory, legislative and industry people who flip this debate so individual parts in the event of leaders needed to orchestrate a that content creators have skin an autonomous car accident. solution. in the game to monetize their This panel convenes both major Gary DeWaal, Katten Muchin creations. car makers as well as a startup Rosenman LLP (m) Brady Dale, CoinDesk (m) to discuss the security, reliability Dr. James Smith, Elliptic Ned Scott, Steemit and opportunity for decentral- The Hon Albert Isola MP, HM Ryan Shea, Blockstack ized car networks. Government of Gibraltar Adi Sideman, YouNow Leigh Cuen, CoinDesk (m Yuzo Kano, bitFlyer Sebastien Henot, Renault- Brian Quintenz, U.S. Commodity Nissan-Mitsubishi-Alliance Futures Trading Commission Deniel Horvatic, Porsche Digital Lab Berlin Lief-Nissen Lundbaek, XAIN AG

3:00pm 3:00pm - 3:10pm NETWORKING BREAK

3:10pm 3:10pm - 3:50pm 3:10pm - 3:50pm 3:10pm - 3:50pm On-Device Key Advances in Privacy and Adapted Financial Management Confidentiality Infrastructure Bitcoin introduced a new need Recent years saw a succession Blockchains have the potential for people to manage and of developments that underline to help traditional financial secure their own private cryp- the extent to which individual infrastructure enhance regu- tographic keys. This need was privacy has diminished; latory transparency, mitigate filled by a boom in the creation Facebook, Equifax, and the list systemic/operational risk, and of digital wallets that store, goes on. Cryptocurrencies are manage capital more efficiently. manage and generate keys. perhaps alone in their business After years of tests, projects are An unintended consequence goal to give us more privacy and ready to go live. These panelists of this has led to the devel- confidentiality rather than less. offer a clear view of what opment of sophisticated and This panel details the advances worked, what disappointed, and bespoke microchips that can of the tools needed to secure how far these changes could help integrate machines into privacy and confidentiality reach. our contractual relationships from unrelenting technological Simon Taylor, 11:FS (m) and secure the development of attacks and business models Chris Church, Digital Asset the IoT through on-device key based on outdated commercial Rob Palatnick, DTCC management. relationships. Dr. Stefan Teis, Deutsche Börse Zaki Manian, Trusted IoT Morgen Peck, (m) Group Alliance (m) Johnny Dilley, Crowd Machine Nicolas Bacca, Ledger Jameson Lopp, Casa Jordan Earls, Qtum Andrew Poelstra, Blockstream Allie Clift-Jennings, Filament

Consensus 2018 49 Schedule | Monday, May 14

3:50pm 3:50pm - 4:30pm NETWORKING BREAK

4:30pm 4:30pm - 4:40pm KEYNOTE Grand Ballroom, 3rd Floor Amber Baldet

4:40pm 4:40pm - 5:00pm The Most Secure and Reliable Commercial Networks in the World Grand Ballroom, 3rd Floor The vision of a decentralized internet built from an innovative intersection of cryptography, engineering and market forces is fast becoming a reality. Three important builders of this decentralized internet discuss how privacy and interoperability solutions; market security, stability and incentivization; and a renewed push toward economic globalization are inspiring them and us to reimagine commercial and personal relationships. Amber Baldet (m) Joseph Lubin, ConsenSys Jimmy Song, Blockchain Capital

5:00pm 5:00pm - 5:10pm Grand Ballroom, 3rd Floor Announcing txTENNA: A Mesh Networking Alternative Broadcast Method for Censorship-Resident Transactions Richard Myers, goTenna Daniela Perdomo, goTenna

5:10pm 5:10pm - 5:20pm Grand Ballroom, 3rd Floor RSK, the First Public Smart Contract Bitcoin Sidechain, is Live! From a White Paper in Consensus 2016 to a fully functional network in 2018, RSK brings the first open source smart contract platform powered by the Bitcoin network. Diego Gutierrez Zaldivar, RSK

5:20pm 5:20pm - 6:00pm Fireside Chat Grand Ballroom, 3rd Floor Nolan Bauerle, CoinDesk (m) Dr. Whitfield Diffie, Cryptic Labs Zooko Wilcox, Zcash

6:00pm 6:00pm - 7:30pm WELCOME RECEPTION Americas Hall 1 & 2 (3rd Floor)

50 Consensus 2018 Schedule | Tuesday, May 15

TUESDAY, MAY 15, 2018

7:00am 7:00am - 7:00pm REGISTRATION 2nd Floor Promenade

7:00am - 8:30am BREAKFAST Americas Hall 1 & 2 (3rd Floor)

8:30am 8:30am - 9:00am Blockchain-Enabled Intellectual Property Management Grand Ballroom, 3rd Floor Stephen MacKenzie, Koch Companies Public Sector Linda Pawczuk, Deloitte

9:00am 9:00am - 9:30am Rewiring Trust: Enabling Enterprise Networks and a Token-Driven Economy Grand Ballroom, 3rd Floor Bridget van Kralingen, IBM

9:30am 9:30am - 9:40am Deloitte: Enterprise Blockchain Announcement Grand Ballroom, 3rd Floor Rob Massey, Deloitte Linda Pawczuk, Deloitte

9:40am 9:40am - 10:00am Consensys Announcement: Making Blockchain Radically Simple For Enterprise Grand Ballroom, 3rd Floor

10:00am 10:00am - 10:20am Blockchain In Enterprises – Digital Trust, Real Business Value Grand Ballroom, 3rd Floor Torsten Zube, SAP SE

10:20am 10:20am - 11:00am NETWORKING BREAK

Consensus 2018 51 Schedule | Tuesday, May 15

TRIANON BALLROOM MERCURY BALLROOM GRAND BALLROOM EAST GRAND BALLROOM WEST

11:00am 11:00am - 11:40am 11:00am - 12:30pm 11:00am - 11:50am 11:00am - 11:40am Ports and Shipping Hubs Forging Democratic Tools Proof Of Work Pitch On Chain Financial Blockchains can enhance the Individuals around the world Competition Products and Services flow of goods, information and stand to gain tremendous Our two-part session on ERC20 ICOs were the start of value between businesses and power through the proliferation investing will feature pitches canned contracts available across borders. For a decentral- of blockchain technology. This from six entrepreneurs who will off-the-shelf. They led to the ized system to succeed, multiple workshop is a series of presen- compete for bragging rights and most innovation early stage stakeholders must navigate tations from people who aim to prize money in our Proof-of- finance has seen since VC blockchains and use them to secure and spread these tools Work pitch competition. started to boom at a time when form commercial relationships throughout the world, followed Naiem Yeganeh, FerrumNet.org Silicon Valley was still covered built from the intersection of by a Q&A with each presenter. Ian Friend, Wilson Elser with fruit farms. These simple cryptography and data. This Rob Allen, nodl.io smart contracts are only the Didier PH Martin, panel convenes some important Vanessa Grellet, ConsenSys beginning of what is possible as stakeholders within ports and Interblockchain Pavel Kravchenko, Distributed this panel will discuss the types shipping hubs to discuss the Jean-Luc Marcoux, of on-chain financial products Lab Interblockchain coordination needed to make R. Jesse McWaters, World and services they are bringing this vision a reality. Federico Ast, Kleros Economic Forum to market. Clement Lesaege, Kleros Noelle Acheson, CoinDesk (m) Michael Perklin, ShapeShift AG Marc Hochstein, CoinDesk (m) Kuan Huang, Supermax Pindar Wong, Belt and Road Olga Feldmeier, Smart Valor Blockchain Consortium Daniel Bar, Tenzorum Project Trevor Koverko, Polymath Anil John, DHS Science & Moritz Neto, Tenzorum Project Shawn Owen, SALT Lending Technology Directorate Todd Mason Scott, IBM Corporation

11:40am 11:40am - 11:50am NETWORKING BREAK

11:50am 11:50am - 12:30pm 11:50am - 12:30pm 11:50am - 12:30pm Enforcement Investor Panel The Global, Never-Ending Regulatory compliance enforce- Entrepreneurs, enjoy fresh Trade Day ment in the US falls under three perspectives from world-class Multiple daily market sell offs of main branches -- the Securities investors who will share their greater than 25%. Habitual bull and Exchange Commission, visions for the future of block- runs of 100X growth. Deriva- the Commodities and Futures chain technology and how to tives, liquidity pools, custody, Trading Commission, and the raise money for your ideas. forks, airdrops and other forces Department of Justice. So, we Matthew Roszak, Bloq that add more complexity brought those responsible for Dan Morehead, Pantera Capital to market swings that are enforcement across the US Alex Lopatine, Park Capital unprecedented in scale. Traders spectrum to discuss how they Lisa Cheng, Vanbex Group, around the world are caught up view their role in the industry. Etherparty and Vanbex Ventures in peculiarities new to everyone. Steve Bunnell, O’Melveny (m) This panel provides a bird’s eye Robert Cohen, Securities and view of exactly how different Exchange Commission Division cryptocurrency markets are from of Enforcement anything that has come before. James McDonald, CFTC Brian Kelly, BKCM (m) Kiran Raj, Bittrex Bobby Cho, Cumberland Sujit Raman, U.S. Department Hu Liang, Omniex of Justice S. Michael Moro, Genesis Global Trading

52 Consensus 2018 Schedule | Tuesday, May 15

TRIANON BALLROOM MERCURY BALLROOM GRAND BALLROOM EAST GRAND BALLROOM WEST

12:30pm 12:30pm - 1:30pm 12:30pm - 2:00pm LUNCH DIVERSITY LUNCH Americas Hall 1 & 2 (3rd Floor) Rendezvous Trianon (3rd Floor) Join our annual ‘Diversity in Blockchain’ luncheon as we bring together leading voices to continue an ongoing discussion to drive towards an environment of inclusion in blockchain